The chairman and president of the Pan-American Life Insurance Group, Jose Suquet, last week described the purchase by NCBJ of 29.9 per cent of the Westmoorings-based Guardian Group as an “interesting transaction,” but not one he is willing to engage in for his own company.
He said while cross-ownership between banks and insurance companies is prevalent in Latin America, such arrangements were tried and did not work out well in the US, which has led to several divestitures of banks that got into the insurance business.
“We would not invest in a bank. They are different businesses.”
He said he had “tremendous respect” for Guardian Group chairman Arthur Lok Jack, who he described as a “gentleman” and an “icon of business” in the Caribbean. Pan-American regards Guardian Group as a high-quality, local company, he said.
“If I were the bank (NCBJ), I would leave them alone and let them do their thing here because Guardian does a nice job here.”
Suquet said selling insurance products to bank customers is one thing, adding: “But where it has been tricky in the US and some other areas is where banks get into underwriting and risk business as opposed to just being a distribution channel, where the economics of the product sale is shared.”
Asked about the Central Bank’s proposed divestment of Clico’s traditional portfolio, Suquet said Pan-American had not seen anything on it, but looks forward to receiving the information that would be necessary for it to make that determination.
On October 30, the company announced that Pan-American Life and Mutual Trust Holding Company had completed the merger of the companies into one mutual holding company.
The combined company, which retains the name of Pan-American Life Mutual Holding Company, will continue to operate as a mutual insurance holding company with approximately US$1 billion in revenues, US$5.5 billion in total assets, 1.5 million covered lives and 1,650 employees.
The combined company will also have US$850 million in total capital, increasing its financial strength.
He said Mutual Trust was about a third of Pan-American’s size and was a significant acquisition, which brings the company back to a 50/50 split between its US and international business and a 50/50 split between individual and group/health business.
In a statement, Suquet said: “The completion of the merger positions us for accelerated growth and improves the financial strength of the combined entity.
“The addition of Mutual Trust’s business complements Pan-American Life’s existing portfolio, creating a more balanced geographic footprint throughout the Americas and a more diversified base of business in the US, thanks to Mutual Trust’s meaningful presence in the US life market and expertise in the mass affluent market.”
He said before Pan-American makes an acquisition, “we have a series of filters that we go through to make sure we have a strategic, geographic and product fit. I would not be surprised if next year or the year after, we are looking for another opportunity.
“The other thing that we are very clear about, and we were very clear in the Caribbean, is that we do not acquire and then burn or pillage the acquired company.
“The employees and agent in Trinidad have seen what we have done to invest in our people and system here and they have responded accordingly with the increased business that we are doing.”
Pan-American entered the Caribbean in 2012 as a result of its acquisition of certain assets owned by Alico, one of which was Algico.
Alico was the regional subsidiary of AIG, the financial services giant that was bailed out by the US government in 2009 to the tune of US$85 billion.
AIG sold Alico to MetLife Inc for US$6.8 billion in cash, but the assets in the region, which includes Panama and Costa Rica, were hived off and sold to Pan-American.
The company operates in the following countries: Antigua & Barbuda, Aruba, Barbados Bonaire Cayman Islands, Curaçao, Dominica Grenada, St Kitts & Nevis, St Lucia, St Maarten, St Vincent & the Grenadines, and Trinidad & Tobago.
All of the operating entities have now been fully integrated into Pan-American.
Suquet said that acquisition “has exceeded our expectations.” He said: “We are very pleased with the Caribbean. It is material to us. T&T represents 60 per cent of our Caribbean revenues and together the Caribbean represents 12 per cent of Pan-American’srevenues.”
He said as the insurance company is planning its 2016 budget, it seems as though the Caribbean is going to overtake Panama as the number one region outside of the US. The company focuses solely on selling life, health and accident policies for individuals and businesses, unlike some of its competitors in the region that have property and casualty, auto insurance, banking and mortgage business. In the segment that it concentrates on, the company is among the top three insurance companies in the Caribbean.
“We are a top-three insurer in all of our foreign markets, except for the two largest ones, which are Colombia and Mexico,” Suquet said. Revenues for the company, which grew 8 per cent to US$704 million, while GAAP pre-tax operating earnings increased by 11 per cent to close the year at US$62 million. Net income for 2014 was US$49 million compared to $57 million in 2013, reflecting lower year-over-year realised investment gains that offset growth in operating income.
In the Caribbean, Pan-American’s individual life insurance business is doing well, with premiums growing by some 8 per cent compared with the US, where premiums are growing by 2 per cent.
The company has seen the most growth in the Caribbean is in employee benefits, which is a combination of group medical and group life.
“We feel we have something special in our employee benefits business, where the service levels are not up to modern internationals standards from some of our competitors. We feel that is an area that we can exploit in a positive way for our corporate customers. We see an interesting growth opportunity in the affluent and high net-worth segment.”
He said Pan-American’s employee benefits business will grow as more and more companies realise that Pan-American has been here for three years already, is in the region for the long haul and has the financial strength and security that is required for an insurance company.
“When someone is buying a large life insurance policy, it is important for the company selling it to have an investment grade rating, which we do.”
He describes the company’s strategy as being simple, pure, focused on its life, accident and health solutions.
Pan-American is a private company, “which is a hybrid between a mutual company and a private company,” but it operates as though it is a public company with that level of financial controls, procedures and risk management.
“We have about US$150 million in excess capital, which puts us in a very enviable position. So we don’t need outside capital that would come through an Initial Public Offering and therefore we don’t see the need to take the company public, at this point, or in the foreseeable future.”
